Letta there be a government in Italy

Italy’s new premier since Sunday will no doubt have to put up with a few jibes in the weeks ahead: “Letta there be a government” and “He’s the Letta of the Law”.

But what will Enrico Letta from the Democratic Party (PD), in a coalition with spendthrift former premier Silvio Berlusconi’s party People of Freedom party, actually be capable of delivering?

Already investors have continued to pile into higher-yielding peripheral government debt like Italy’s. There was appetite last week for the latest zero coupon CTZ notes from the Italian Treasury which recorded the lowest-ever yield on the notes in the programme’s 13-year history.

Nevertheless that appears to be more driven by speculation that the European Central Bank will this week cut interest rates to 0.50% and so dissuade even more buyers of safer haven German Bunds, than it is by the (possibly) improved political mix in Rome.